Securities Lawyers Blog
The law offices of Gana Weinstein LLP has recently filed securities arbitration case on behalf of an investor against UBS Financial Services, Inc. and UBS Financial Services, Inc. of Puerto Rico (UBS) involving allegations that UBS’ misleading sales tactics and inappropriate recommendations surrounding Puerto Rico bonds in the Claimant’s portfolio. According to the complaint, UBS encouraged a 26 year-old unemployed single mother to invest her life savings in just three Puerto Rico municipal bonds—Puerto Rico Employees Retirement System Bonds (ERS Bond), Puerto Rico Commonwealth Public Buildings Authority Bonds (Commonwealth Bond), and Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority (AFICA) Industrial Revenue Refunding Bonds (AFICA Bond). In addition, the complaint alleged that UBS recommended that the Claimant take out significant loans to leverage up her investment in these three bonds that were all hovering just above junk status.
The Claimant is a 26 year-old single mother, dedicates all of her time towards caring for her eighteen-month-old daughter. Unfortunately, the Claimant’s father passed away in October 2010 causing Claimant to receive life insurance proceeds from his passing. The Claimant used some of those proceeds to pay off the debts that she had accrued over the years and sought to use the remaining portion to invest for the future of her and her daughter.
Claimant alleged that UBS completely disregarded the risks inherent to the Puerto Rico municipal bonds and constructed a portfolio comprised solely of these soon-to-be-defunct securities. Claimant’s brokers Ramon M. Almonte (Almonte) and Juan E. Goytia (Goytia), recommended an approximate 130% concentration, through the use of leverage, in municipal debt. Claimant alleged that the bonds were portrayed as safe, secure, fixed-income securities that would preserve her principal while providing tax-free income. Contrary to UBS’ portrayal, the bonds recommended are volatile investments carrying a multitude of risks. According to the complaint UBS’ unsuitable recommendations and inappropriate asset allocation ultimately cost the Claimant most of her money.
By May 2014, the value of Claimant’s holdings fell significantly and the Claimant asked UBS to close her account. After being forced to satisfy the margin loan, Claimant alleged that she suffered almost a 70% loss on the investments.
Claimant’s broker, Almonte, currently has 31 pending customer complaints filed against him all of which concern the broker’s recommendation to overconcentrate client assets in the UBS Puerto Rico bond funds, employ leverage, and other Puerto Rico debt. It is possible that Mr. Almonte recommended the very same speculative investment strategy to many of his clients causing each of them to sustain drastic losses when the Puerto Rico municipal bond market crashed. In addition, Goytia currently has 7 pending complaints filed against him also concerning Puerto Rico municipal bonds funds and debt.
Claimant’s complaint is only one of nearly 400 cases that have been filed against UBS concerning the firm’s sale of UBS Puerto Rico bond funds. These cases generally allege that the funds and municipal debt contained substantial risks that were downplayed by the firm’s advisors in order to generate sales in the firm’s proprietary products. One of the UBS’ funds’ risks is the funds employ leverage of up to 100% of the funds’ investments to invest in additional municipal debt. In addition, many clients have alleged that UBS brokers encouraged them to borrow even more money to invest in the funds or municipal debt through the use of margin and bank loans. The steep declines in the funds’ values have caused UBS clients to become forced to meet margin calls on those loans causing millions in additional losses.
The attorneys at Gana Weinstein LLP can help you evaluate your Puerto Rico bond case and determine if avenues of recovery exist. For a free consultation please contact us.